Constant changes and ever-increasing complexity to the tax system as well as technology adoption in Vietnam result in challenges for the modern accounting and tax compliance when doing business in Vietnam.
Due to these challenges, many companies in Vietnam are now rethinking their approach to local and even international compliance. They aim to resolve the challenges by taking a closer look at their accounting and tax reporting service providers, technology, and other resources.
This article elaborates the top challenges of accounting and tax compliance in Vietnam nowadays and how you can tackle them to run a smooth business in Vietnam.
Compared to many countries in the world, the compliance across taxes, statutory accounting and tax reporting of a company in Vietnam has become more and more time-consuming and complicated. This is particularly due to the constantly changing requirements, such as reporting that is required on a monthly, quarterly, half-yearly and annual basis.
The obligations of tax and accounting compliance are specific to each enterprise. That’s why it becomes a challenge when a unique written compliance framework is required for each business.
However, many enterprises do not really follow this time-consuming process, making them not entirely fulfilling the compliance. The results of non-compliance from these companies are penalties issued by the Vietnamese government.
Many business owners may know that Vietnam has a very strong business culture across all types of workplace. For example, cherishing harmony over disagreement, taking the time to foster relationships before business, and going through several meetings before finally coming up with a decision.
As a result, ineffective communications may happen, such as forgoing compliance obligations and errors in self-reporting. Employees may choose not to communicate with their management about their mistakes because of the pear of being reprimanded or because they want to save face. Therefore, transparency in a workplace will be able to overcome this challenge significantly.
Companies in Vietnam often do their tax and accounting works through self-review. In other words, once the person in charge has done all the necessary tax and accounting compliance work, there’s no further review and validation from another qualified person or professional.
This is particularly common in many small enterprises and poses one of the biggest challenges to them in relation with compliance. For larger companies, they usually put too much trust or responsibility on one single person and that’s why mistakes happen. Thus, having different levels of review for tax and accounting work in an organisation is critical to identify errors and rectify them immediately.
Related article: Your Comprehensive Guide to Tax Incentives in Vietnam
Let’s face it, the accounting, tax and compliance in Vietnam is not cheap. Therefore, if you have a small business in Vietnam, you would have to pay unproportionally compared to large businesses. The lack of feasibility brings more challenges to small companies, especially to foreign business owners.
In addition to that, you will need to take into account other general resources costs such as hiring and recruitment, training, and costs of corrective activities.
Vietnamese Accounting Standards (VAS) is required for businesses in Vietnam as their fundamental accounting system. VAS is not very flexible when it comes to documentation process and reporting formats.
Furthermore, accounting software used for Vietnamese businesses must comply with VAS guidelines with the approval of VAS. These limitations have caused the difficulty of using international accounting software in Vietnam.
Without the implementation of international accounting software, most Vietnamese accountants lack the knowledge of international accounting. As a result, this has brought many challenges to foreign investors as their businesses are operated globally.
You might also want to read Annual Tax Return in Vietnam in 2019
Cekindo encourages all foreign investors, especially when you’re new to the Vietnamese complex tax system, to seek professional tax and accounting assistance.
Not only will you save time and unnecessary costs, but you will also ensure your tax and accounting compliance for a more successful market entry and business in Vietnam. Talk to us now for more information by filling in the form below.